Scenario 14-2

Multiple Choice

Scenario 14-2. The economy is in long-run equilibrium. Suddenly, due to corporate scandals, international tensions, and the loss of confidence among policymakers, citizens become pessimistic concerning the future. They maintain this level of pessimism for a long time.
-Refer to Scenario 14-2. In the long-run, the change in price expectations caused by pessimism leads to which of the following shifts?

A) Long-run AS shifts left.
B) Long-run AS shifts right.
C) Short-run AS shifts right.
D) Short-run AS shifts left.